Tuesday, December 18, 2012

Tuesday higher

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Tuesday higher, low confidence.

ES pivot 1427.25. Holding above is bullish.

Rest of week bias uncertain technically.

Monthly outlook: bias lower.

ES Fantasy Trader standing aside.

Recap

My conditional call for Monday panned out nicely. ES wandered about its pivot in the wee hours of the morning, broke above around 8 AM, then made a quick retest that failed at 9:25 AM. After that, it was just up, up and away as the Dow finished up a solid 100 points. We now set our sights on Tuesday as the last full week of the year marches on. (and Blogspot's blinkin' spell checker is on the fritz again, so I apologize in advance for any typos I may have missed).

The technicals (daily)

The Dow: So the Dow's big win today completely retraced the last two days worth of losses and ejected us from a very short descending RTC. While the indicators remain overbought, the stochastic seems to be flattening out for a bullish crossover. So this really throws a wrench in the thesis that last Wednesday marked a short-term top. However, Tuesday will be critical as we're now just below the resistance at 13,250 that stopped us all last week. If we can close above that, the Dow may be headed for its upper BB at 13,315.

The VIX: Last night I thought there might be some upside left to the VIX, and there was, at first. Then it was all downhill as the VIX lost 3.88% on a tall marubozu that also formed a big bearish engulfing candle and kicked us right out of a rising RTC. Significantly, we also hit the upper BB at 17.19 today and that's always a good sign of a top in the VIX. So although the indicators are not yet up to overbought, I now think we could see further downside action here on Tuesday.

Market index futures: Tonight all three futures are up at 1:26 AM EST with ES higher by a respectable 0.26%. Today's strong green marubozu took us right out of a steep descending RTC for a bullish setup and the follow-through in the overnight is suggesting a bullish trigger. This has also broken through resistance at 1432, however there's more resistance close by in the form of the upper BB at 1438.62. ES actually touched that earlier this evening and then fell back. But we now have a completed bullish stochastic crossover along with indicators that have hooked upward before hitting oversold, so the bearish pressure seems to be evaporating here.

ES daily pivot: Tonight the pivot rises from 1417.33 to 1427.25. We were above before and remain above the new pivot. Although the span has narrowed, it's still a comfortable 12 points, so that's bullish.

Dollar index: On Monday the dollar lost just 0.04% on a teensy little toy hammer. That was still enough to bang the dollar into oversold territory and also trade outside the descending RTC for a bullish setup. There's now at least a hint on this chart of some dollar gains later this week.

Euro: While the US markets rallied hard on Monday, the euro put in a small red spinning top that just touched its upper BB, hinting at an impending reversal. This is supported by an RSI at a highly overbought 98.12. So far in the overnight, it appears to be still just thinking about it, although this chart could be getting ready to move lower. Maybe not Tuesday, but before the end of the week.

Transportation: Hah - so much for the devil's pitchfork. After four straight days of dojis where the trans kept probing the 5225 region only to fall back to the 5190 area, today they blasted right through that resistance to close at 5227. However, we're still not out of the woods here because the trans are now highly overbought and sitting close to their upper BB at 5249. After a big gain like on Monday, the trans may need to rest a day.

Hmmm... calling op-ex weeks can be challenging. And right now I see a bunch of charts that are nearing various levels of support or resistance. OK, so here's what I think - the market is going to take some time to digest Monday's gains, but since we do have some decent positive momentum coming into Tuesday and also positive seasonality reasserting itself, and some encouraging fiscal cliff noises emanating from Washington, I'm going to call for Tuesday higher - not by much mind you, but I think that in the absence of any real bearish pressure, it's the logical move.

About Me

Michele is a swing trader, a night owl, and a student of Japanese candlestick charts. She retired from a large tech company at the age of 50 and has now been trading US stocks and occasionally the e-minis on a full-time basis as an independent trader since 2004.
The Night Owl Trader publishes every trading day late at night (or very early in the morning) around 1 or 2 AM, with occasional bonus commentary and analysis thrown in on weekends.
The Night Owl is independent, ad-free, and made freely available to all. Contact me at nightowltrader (at) gmail.com.

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Disclaimer

(My lawyer made me do it) This blog is not trading or investment advice, account management or direction. All trades listed here are presented only as examples of the author's personal trading style. Investing entails significant risk and trading entails even greater risks. Act accordingly.